R. Kamani & Ors Vs. R.R. Kamani  INSC 284 (19 September 1988)
M.P. (J) Thakkar, M.P. (J) Sen, A.P. (J) Natrajan, S. (J)
1989 AIR 9 1988 SCR Supl. (3) 123 1988 SCC (4) 387 JT 1988 (3) 700 1988 SCALE
INFO : R 1991 SC2176 (51)
of India, I950: Articles 31C and 142--Sick
Industrial Companies (Special Provisions) Act, 1985-- Constitutional validity
of--Workers' Scheme for revival of Kamani Tubes Limited--Directions by courts.
industrial Companies (Special Provisions) Act, I985: Sections 2 and 18--Kamani
Tubes Limited--Workers' Scheme for revival of company.
dispute between different branches of an industrialist family culminated in the
instant special leave petition.
Court, with a view to speedily resolve the dispute between the parties, and
keeping in view the interest of the workers employed in the Kamani Tubes Ltd.
(KTL). in August 1984 persuaded a retired Judge of the Supreme Court to mediate
between the parties. In August 1985, (KTL) stopped production. During the
discussions before the Mediator on July 2, 1986 it was decided that the different
groups of the family would try to find a willing buyer for 90% shares held by
them. At the same time, the Mediator permitted the workers to frame a scheme on
their own for restarting the factories.
July 1987 the Kamani Employees Union (KEU) instituted a petition seeking
Court's directions for the sale of KTL shares to KEU and for expeditious
consideration of the scheme submitted by the workers for the revival of the
factories. In pursuance of the directions of the Court, the scheme was scrutinised
by the Board for Industrial and Financial Reconstruction (BIFR) constituted
under the Sick Industrial Companies (Special Provisions) Act, 1985. The Board
after consultation with various agencies including the Industrial Development
Bank of India, sanctioned the Workers' Scheme on 6th September 1988, which was placed before the Court
for further orders. At this stage one of the parties (Shri Ashish Kamani)
submitted an alternate scheme.
stamping the Workers' Scheme with the imprimatur of the Court, it was.
123 PG NO 124
(I) When the two Schemes are viewed in juxtaposition, there is no manner of
doubt that the scheme presented by Shri Ashish Kamani appears in a rather poor
light. The entire scheme is wrapped in imponderables and is built on a non-existant
foundation. [134G; 135B, 135C]
Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985
inter-alia provides for the reduction of the interest or rights of the
shareholders in the sick industrial company to the extent necessary for the
reconstruction, revival or rehabilitation of the sick company and further
provides for the transfer of its shares at their face value or intrinsic value
to the employees of the sick company. [136F G]
The provision for transferring the shares to the employees makes manifest the
intention of the legislature to encourage the employees to take over the sick
units and to clothe the competent authority with power to direct the transfer
of the shares to the employees in this behalf. Thus the authority and
competence of the BIFR to issue a direction for the transfer of the shares to
the employees has the full backing Of the benevolent legislation enacted
especially in order to restructure or revive the sick undertakings. [137A-B]
The BIFR has rightly reached the conclusion that the intrinsic value of the KTL
share is zero and the Board was perfectly right in directing the members of the
Kamani family to transfer the shares at the rate of Re. 1 per share in order to
effectuate the Scheme for revival of KTL. [137E- G]
Since the Scheme is being framed under the statutory authority and directive in
order to revive the industry in the larger public interest and inasmuch as
there is a necessary declaration contained in Section 2 of the Act which
attracts the applicability of Art. 31C Of the Constitution, the decision
rendered by the BIFR is unassailable and unimpeachable. [138D]
The Scheme has been framed as per the direction and mandate of this Court in
exercise of its inherent constitutional jurisdiction under Art. 142 of the
Constitution and there ore the framing of the Scheme and the enforcement of the
sanctioned scheme does not detract from or have any impact on the obligation
incurred by the guarantors in regard to the debts incurred by KTL in past. The
concerned Banks were and are bound by the directives and mandates. [138E-F] PG
Notwithstanding any order that may be secured by party from any other forum the
Scheme shall be implemented in obeisance to the judicial command embodied in
this order and that in a there is any problem, it may be brought to this Court
for seeking appropriate directions instead of resorting to other forums to
impede the implementation of this socially and economically wholesome scheme.
APPELLATE JURISDICTION: Civil Mice. Petition No. 22428 Of 1988.
LEAVE PETITION (CIVIL) NO. 15228 OF 1983.
the Judgment and Order dated 17.8.1983 of the Bombay High Court in Arbitration Petn.
No. 6 of 1983.
DIRECTIONS WlTH CMP Nos. 22429/88 & 3805f87).
the matter of the scheme for revival sanctioned by the BIFR by its decision
dated 6th September,
1988 in pursuance of
the directions of this Court.
D.H. Nanavati, Raian Karanjawala, Mrs. Manik Karanjawala and Hardeep S. Anand
for the Petitioners.
Y.S. Chitale, S. Ganesh, I.R. Joshi, Arun Sinha, P. Parmeshwaran, A.K. Sinha,
Mrs. Vijayalakshmi Menon, B.R. Agarwala, Ms. Sushma Manchanda, Ms. Urmila Kapoor,
B.V. Desai, A.K. Verma, D.N. Misra, Shri Narain, Atul Sharma, Vineet Kumar,
A.S. Bhasme, P.H. Parekh, M.K. S. Menon, K.C. Dua, H.S. Parihar, K.J. John,
A.K. Sinha, Girish Chandra, A.K. Sil, G. Joshi, Ms. Nina Gupta, Vineet Kumar,
S.K. Dogra, Harish N. Salve, Ms. Nina Kapur and Manoj Swarup, for the
Gopal Subramaniam and Mukul Mudgal for the Intervener.
Order of the Court was delivered by THAKKAR, J. More than a thousand brimming
eyes are waiting to, replace the tears of despair by tears of relief.
less than 600 wronged _ workers of a once prosperous industrial unit' induced
or reduced to sickness' are on their toes to resort to self-help to restore
Tubes limited (KTL) PG NO 126 the lost source of their butterless bread. Their
pens are quivering to write a new chapter in the sage of workers' struggle for
finding their true 'indentity' and 'dignity'.
dream is coming true with the enlightened and refreshing approach of the
Central and State Governments, and the concerned Nationalized Banks, coupled
with prompt, efficient and swift decision making on the part of the BIFR3 and
the IDBI. And with the consensus of all the parties (which is the most
heartening feature) who have risen above narrow individual interests by not
opposing the workers' scheme in order to promote the larger National interest
of reviving the industry, augmenting the National product and providing
employment to hundreds of starving workers (three of whom became martyrs to the
cause by committing suicide).
discord gave rise to disputes and litigations between different branches of a
family headed by a pioneering and successful industrialist in the wake of his
demise, which culminated in SLP No. 15228 of 1983 wherein all the concerned
members of the family were impleaded. When the said matter came up before this
Court it was .1) impressed upon the parties that the internecine conflict
between the warring factions deserved to be speedily resolved, not only in
their own interest, and for saving the name and honour of the founder, but also
to ensure that neither the industrial units nor the workers employed in the
industries which were controlled by one or the other branch of the industrial
family, were ruined. A retired Judge of the Supreme Court' was accordingly
prevailed upon to accept the assignment of resolving the innumerable problems
in the larger interest of the warring factions as also in order to protect the
interests of the community and the workers in August 1984. The learned Mediator
has invested considerable time, effort and accumen in order to resolve the
problems presented in the course of the proceedings and has successfully
disentangled the economic mess to a considerable extent. This is evident from
the fact that after the learned Mediator came on the scene Income Tax and
Capital Gains Tax dues to the tune of over Rs.48 lakhs and over Rs.35 lakhs
respectively have been paid.
Bank of India, Canara Bank and Dena Bank.
Board for Industrial and Financial Reconstruction constituted under the Sick
Industrial Companies (Special Provisions) Act of 1985, (Act).
Industrial Development Bank of India.
127 In the course of the proceedings it came to light that:
KTL has stopped production and ceased working in August 1985.
KTL has not resorted to closure of the unit or to retrenchment of the workers
in accordance with the relevant provisions of law.
While in the eye of law and in theory the workers continue on the rolls of KTL
and in employment of KTL, the workers have not been paid wages for over 8
months since December 1984 till stoppage of work in August 1985 and ever since
till now. The arrears till August 1988 work out in the region of Rs.6 1/2 crores.
The wages due to the workers amounting to approximately Rs.2.5 crores have
remained unpaid since December 1984.
Employees' contribution to Provident Fund actually deducted from the wages of
the workers to the tune of approximately 31/2 lakhs had been wrongfully
retained by the management and criminal prosecutions are pending in the
The starving workers who have not been paid their wages since December 1984
have been squatting on the factory premises which have been abandoned by the
Management. The workers have remained on the premises in order to keep day and
night vigil for all these years since August 1985 in order to protect the plant
which had provided them work and enabled them to earn their bread with the
sweat of their brow.
Three of the starving workers have committed suicide on account of their
inability to survive the burden of misfortune heaped on them.
plight of the workers notwithstanding, they exhibited exemplary conduct in
their part, and the Kamani Employees Union (KEU) extended its hand of
cooperation to the Kanani family group as has been noticed by the learned
Mediator in his minutes dated July 2, 1986:.
128 "The bona fides of the applicant workers would be clear from the fact
that in spite of the fact that no wages have been paid to them for the last 14
months, yet, in order to demonstrate their spirit of cooperation, the workers,
through their union, had offered in writing to cooperate with the management
and accept deferred payment of unpaid wages. The applicants repeat and
reiterate that offer. The workmen always were, and still are ready and willing
to accept the ar}ears of unpaid wages with increase of production and creation
shall be happy if the authorities who have to take a decision in this matter
could find their way to accepting the request of the workers who have not
received wages for about 16 months now.
regards the two proposals given by the workers, neither of them was found
acceptable by any of the Kamani family groups present; they thought that the
proposals were not feasible." A proposal was then mooted to sell 90% of
the shares of KTL. Meanwhile the workers sought leave to frame a scheme of
their own for revival the 'sick' unit. What exactly transpired 2- 1/2 years
back has E been recorded in the Mediator's minutes dated July 2, 1986:
the end of the discussions it was decided that the different groups of the
family or any of them would try to find a buyer willing to buy the 90% shares
held by the family in Kamani Tubes Limited as it is at present. The buyer will
have to sit with the workers of the company to come to an agreement with them
with regard to the payment of their dues. If the prospective buyer wishes to
inspect the factories, no objection would be raised either by the workers or
the present management of the company. Parties will report to me within six
weeks any progress made in this matter.
behalf of the workers it was submitted that as the search for a buyer was
likely to take time, they may be permitted in the meantime to try and frame a
scheme of their own for restarting the factories after discussing the matter
with the Bank and other authorities. They are free to do so." PG NO 129
And after an exasperating waiting period of nearly one year thereafter the
workers instituted CMP No. 3805 of 1987 on July 2, 1987 inter alia seeking the
All appropriate orders and directions for the sale of the shares of KTL to KEU
on behalf of and representing the proposed society at such price and on such
valuation as this Hon'ble Court in its absolute discretion deems proper and
subject to such terms and conditions as may be stipulated.
orders and directions to the said Board respondent No. 59 to take expeditious
remedial and other measure for the revival of the factories of the K.T.
directions to the said Board to consider the scheme of the applicants for the
revival and rehabilitation of K.T in terms of Exhibits 10 and 12 hereto.
appropriate orders and directions for the implementation and consideration of
the scheme for the revival of the factory of K.T. as per Ex. 10 and 12 hereto
including directions for management of K.T., amendment of Articles of K.T. and
all matters connected therewith with such modifications as may be deemed
necessary." By an order of this Court. dated October 13, 1987 in CMP
3805/87, this Court directed the BIFR to file a feasibility report with respect
to the scheme presented by the workers for the revival of KTL . This Court also
directed the BIFR to hear the workers as well as the different groups of Kamani
family before making its recommendations. As per this direction the Board held
a number of hearings which were attended inter alia, by representatives of KEU
. Financial Institutions, Banks, State Government,-Central Government and
different groups of the Kamani family, IDBI, an apex institution in the field
of term lending and one of the operating agencies of BIFR, was entrusted with
the examination of KEU's scheme particularly with regard to technical health of
the plant and time required to run it, various, assumptions made in respect of
the parameters of costs/prices, estimates of production pattern vis-a-vis
projection of future demand, correctness of cost of production, working capital
requirement projected operating cash surplus etc. IDBI submitted its report
which was discussed in the subsequent hearings and the views of the concerned
agencies, such as, Banks, State Government, Central Government.and the
commitments regarding reliefs and PG NO 130 concessions that would be available
from these agencies, were obtained.
being so required IDBI subsequently revised its projections and viability
estimates. Based on the above, BIFR prepared its Feasibility Report and
submitted it to this Court. After considering the report of BIFR, and hearing
various parties and with the consent of the parties, this Court vide its order
dated 20th April, 1988 directed, inter-alia, that the matter be placed before
BIFR for consideration whether it should proceed to pass an order in terms of
the proposed scheme as revised in consultation with IDBI under Section 18(4) of
the Sick Industrial Companies (Special Provisions) Act, 1985. The Board was
requested to arrive at a decision after giving notice to all the concerned
parties. The relevant part of the order deserves to be quoted:
compliance with the Court s order dated 13th October, 1987 the Board for Industrial
& Financial Reconstruction New Delhi, established under section 4 of the
Sick Industrial Companies (Special Provisions) Act, 1985 in consultation with
the Industrial Development Bank of India, constituted under section 3 of the
Industrial Development Bank of India Act, 1964 as its operating agency within
the meaning of section 3(1) of the Act, considered in depth the scheme
submitted by the Kamani Employees Union and has evaluated the same by its
'feasibility report dated 12 th January, 1988. We have heard learned counsel
for the parties and they agree to the order we purpose to make.
direct that the matter shall now be placed before the Board for Industrial
& Financial Reconstruction for consideration as to whether it should
proceed to pass an order in terms of the proposed scheme as revised in
consultation with the Industrial Development Bank of India under section 18(4).
The Board .shall come to a decision after notice lo all the parties and it
shall act in conformity with the provisions of the Act. The Board may, if
necessary, frame its own scheme or adopt the proposed scheme framed by the Kamani
Employees Union, with such modifications as it deems fit. The Board shall also
be at liberty to consider any alternative scheme at its discretion but the
whole exercise shall be completed within eight weeks from today. If the
objections to the Kamani Employees Union s scheme are not sustained the said
scheme shall be dealt with according to law. '' PG NO 131 Pursuant to the
direction of this Court, the Board afforded a hearing to all the concerned
parties on 20th May, 1988 and after having ' examined the submissions made but
the various groups of Kamani family, Banks, State Government and Central
Government, prepared a Draft Scheme for revival of KTL. The said draft Scheme
was circulated to all the parties concerned and short particulars thereof were
also published in two news dailies for the information of the shareholders, the
creditors and the employees etc. in general. The parties were given due notice
for making suggestions/raising objections with respect to the Scheme.
receipt of various suggestions/ objections the Board held its hearing on
28.7.88 for considering the same. After hearing all the parties, and after
having examined all the written/oral submissions made, the Board has financed,
and sanctioned the scheme as per its decision dated 6th September, 1988 which
has now been placed before this Court for further orders in the light of the
submissions of the concerned parties Two questions arise in the context of the
Workers' Scheme which has been sanctioned by the BIFR as per its decision dated
September 6, 1988:
Whether the Scheme presented by Shri Ashish Puranchand Kamani, applicant in CMP
No. 22428 of ]988, at the time of the hearing on 12th September, 1988 (which
was not presented before BIFR) deserves to be considered having regard to his
claim that his scheme is preferable to the Workers' Scheme already sanctioned
by the BIFR on September 6, 1988:
Whether the Workers' Scheme as sanctioned by BIFR deserves to be stamped with
the imprimatur of the Court.
scheme presented by Shri Ashish Kamani who claims to hold 24% of the shares of
KLT, could not be presented before the BIFR. which was seized with the matter
in regard to the framing of a feasible Scheme in pursuance to the directions of
this Court, till the BIFR rendered its decision on September 6, 1988. In the order dated April 20, 1988, this Court had observed that:
Board may, if necessary, frame its own scheme or adopt the revised scheme
framed by the Kamani Employees Union, with such modifications as it deems fit.
The board shall also be at liberty to consider any alternative Scheme PG NO 132
at its discretion but the whole exercise shall be completed within eight weeks
from today." Two points must be underscored. First, that the Court had
merely accorded "liberty" to the Board to consider any alternative
scheme. and secondly that the matter was left to the "discretion" of
the Board. It is therefore clear that no 'right' was conferred on any party to
present a new scheme.
was given to the Board to exercise its discretion to consider any alternative
Scheme if it was presented within the time-frame. Learned counsel for the
applicant Shri Ashish Kamani, could not contend that any 'right' was conferred
on the applicant to present a Scheme. In fact there was no obligation on the
part of the Board to consider the Scheme even if it was presented within the
matter of fact the applicant did not present any scheme before BIFR within the
time-bracket specified by this Court.
the Board has, after full and complete deliberation, rendered a well-considered
decision sanctioning the Scheme of the workers. On 6th September, 1988, about a week before Shri Ashish Kamani, the applicant,
was able to present his Scheme. It is not necessary to examine the issue as to
whether or not there was any justification for not presenting the Scheme before
the stipulated deadline. Even though it is too late to examine the applicant's
scheme it is not considered appropriate to shut out consideration of the scheme
only on the ground that it is being presented so late and the workers' scheme
has already been sanctioned much earlier. In case the applicant is able to
persuade the Court that the Scheme presented by him is preferable to the
workers' scheme in the larger interest of all concerned, the decision rendered
by the BIFR could possibly be set aside and the Scheme presented by the
applicant could possibly be remitted to the BIFR for considering the whole
matter afresh. Of course it would cause great hardship to all concerned more
particularly because the Scheme sanctioned by BIFR on 6th September, 1988 comes into force with 'immediate
effect'. It has also to be realised that the matter would be delayed by several
months at the cost of the suffering workers. These are considerations which are
more than adequate to discourage and deter the Court from undertaking any such
exercise. All the same we have heard the learned counsel for the applicant in
regard to the Scheme presented by him even at this late stage. As indicated
earlier learned counsel for the applicant stated that while the applicant did
not oppose the Scheme presented by the workers, the applicant was confident of
persuading the Court to hold that the Scheme presented by the applicant was by
far in the larger interest of all concerned as compared to the Scheme presented
by the workers and sanctioned by the Board. In PG NO 133 order to effectively
deal with this question the cantours of the two Schemes require to be traced:
presented by the Scheme presented by Shri Workers Ashish Kamani
contemplates starting 1. It envisages the operations with the existing
replacement of the existing machinery after effecting machinery by imported
second- necessary repairs and hand press and plant reconditioning of the plant
equipment, at an estimated to the extent necessary. It cost of Rs.345 lakhs. It
is is envisaged that the not known how much time will production can be commenced
elapse in replacement and within about six months. when operations can be
commenced. There is not even a vague idea about this factor.
scheme is fully backed 2. The Scheme does not show by the same Nationalized
that there is even a banks as are secured tentative commitment much creditors
of KTL. These banks less a firm commitment by any have also made firm Banks or
financial commitments for further institutions to finance the financial
assistance. project. Nor is it shown that the applicant himself is investing
any sizeable amounts to lauch the project.
Scheme is altogether silent as to how the resources are to be raised in regard
to the modernization programme involving Rs.694 lakhs.
Central Govt. and the 3. Neither the Central State Govt. have agreed to Govt.
nor the State Govt. grant tax concessions having has shown its willingness to
regard to the fact that it is give any concession to the the first Scheme of
its kind applicant. In fact there for reviving an industrial appears little
likelihood of unit framed by the very such concessions having workers rendered
jobless on Regard to fact that the account of the sickness. special factors
relating to public interest involved in enabling the workers themselves to
revive the sick industrial unit does not exist in the case of the applicant.
workers themselves 4. The workers would not have agreed ( I) to make wage agree
to forego any part of sacrifice of 25 % for the their wages or make a wage
first year of operations and sacrifice to enable the 15% for the next two
years. applicant to take over the in other words the workers unit. Nor the
workers would have agreed to forego 15% to accept deferment of dues or 25% of
the wages which they to rationalization of staff would be otherwise entitled
pattern or retrenchment. to having regard to the fact Learned counsel for KEU
has that it is the workers own stated that they are not at Scheme calculated to
benefit all prepared to do so.
in future (2) to deferment of annual increments for two years as also (3) to rationalisation
of the staff pattern by persuading the workers to be 3retrenched on payment of
compensation in the larger interest of the workers and to restrict the workers
to 600 (4) to forego dues subsequent to 31.12.85 (5) to deferment of prestoppage
dues till other dues are paid off.
secured oreditors have 5. There is no such agreed to convert 50% of commitment
on behalf of the dues into interest free loan secured creditors. Nor is
repayable within 10 years and there any liklihood of such a moratorium of one
year for concessions for the benefit for 50% of outstandings . of the applicant
Scheme has been found 6. The fessibility of the to be feasible and viable by
applicant's claim has not experts and by the operating been examined by any
agency viz. IDBI, which is competent or authorised fully equipped to form the
agency acceptable to the opinion in this behalf. BIFR.
the two Schemes are viewed in juxtaposition, there is no manner of doubt that
the scheme presented by the applicant appears in a rather poor light. In fact
the said scheme suffers from some fundamental infirmities. It is not shown that
there is any commitment on behalf of any Bank of financial institution to
provide the requisite financial PG NO 135 resources to enable the applicant to
modernize the plant and to run it. The applicant 'hopes' to purchase a
second-hand plant from some foreign country. It is not known whether any such
second-hand plant in working condition with reasonable life expectancy is
available. It is not known what would be the cost thereof. It is not known
whether the Central Govt.
release foreign exchange in order to enable the applicant to purchase the said
plant. Thus the entire scheme is wrapped in imponderables and there is no
concrete basis to entertain a reasonable belief that the 'hope' entertained by
the applicant would materialise at all in the foreseeable future. It is
proposed to finance the cost of the additional plant and machinery to the tune
of Rs.694 lakhs out of which it is stated that Rs.520 lakhs will be by way of
term loan assistance from banks and financial institutions. It is conceded that
there have been no negotiations with any Bank or financial institution and
there has not been even a tentative, not to speak of a firm commitment in this
regard to the remaining Rs.174 lakhs it is stated that it will be by way of promoters
contribution or through issue of share capital. whether or not Rs.174 lakhs can
be so raised is in the realm of wishful thinking and conjecture.
merely reflects the hope of the applicant which is not rooted in reality. It is
built on a non-existant foundation.
it shown whether the applicant himself has any sizeable financial resources of
his own. Or whether he is in a position to raise such resources. The Scheme is
a manifestation of the hope and 'desire of the applicant and no more. There is
little doubt about the fact that no useful purpose will be served by granting
the request of the applicant in these circumstances. Even so we would have
considered the matter further if the applicant had satisfied this Court about
his bona fides and provided an assurance that delay will not be to the
detriment or prejudice of the workers or at their cost. An enquiry was
accordingly made from the learned counsel for the applicant whether the
applicant was prepared to deposit a sum of Rs. 1 crore representing about 15%
of the arrears of wages which have by now become payable to the workers to enable
the Court to examine the matter notwithstanding the aforesaid short- comings.
The learned counsel for the applicant frankly stated that the applicant was not
in a position to deposit such a sum s/p In fact he did not even mention that
the applicant was prepared to deposit a lesser sum in order to show his good
faith and bona fides and in order to protect the legitimate interests of the
workers. Counsel wanted the Court to consider the Scheme without any such
provision being made merely on the assertion that the Scheme presented by the
applicant was the only feasible Scheme which appears to be an altogether
ill-founded assertion for the foregoing reasons. Under the circumstances we do
not have the slightest hesitation in refusing the applicant's prayer in this
136 In order to deal with the remaining question as regards stamping the Scheme
sanctioned by the BIFR on September 6, 1988 with the imprimatur of the Court is
concerned, it will be appropriate to take a glance at the provisions of the
Sick Industrial Companies (Special Provisions) Act, 1985 under which the Board
has been constituted, before the exercise is undertaken.
statement of objects and reasons reveals the purpose underlying the benevolent
legislation as also the anxiety of the legislature to provide for preventive,
ameliorative and remedial measures essential for reviving sick or potentially
sick companies and for ensuring expeditious enforcement of the measures devised
by the competent authority under the Act. The statement of objects and reasons
discloses the anxiety of the legislature at the alarming increase in the
incidence of sickness of industrial companies and it also reveals that the
legislation has been enacted with the end in view to:
maximum protection of employment;
the use of funds of the companies etc.;
the production assets;
the amounts due to the Banks etc.; and
replace the existing time-consuming and inadequate machinery by efficient
machinery for expeditious determination by a body of experts.
scheme envisaged by Section 187 of the Act inter- alia provides for the
reduction of the interest or rights of the shareholders in the sick industrial
companies to the extent necessary for the reconstruction, rovival or
rehabilitation of the sick company. There is also a very salutory provision
which contemplates transfer of the shares in the sick industrial company at
face value or intrinsic value (which may be discounted value or such other
value as may be specified) inter-alia
Section 18(2)(f): "the reduction of the interest or rights which the
shareholders have in the sick Industrial company to such an extent as the Board
considers necessary in the interests of the reconstruction, rovival or rehabilitation
of the sick industrial company or for the maintenance of the business of the
sick industrial company;" PG NO 137 to the employees of the sick
industrial companies. The provision for transferring the shares to the
employees which makes manifest the intention of the legislature to encourage
the employees to take over the sick units and to clothe the competent authority
with power to direct the transfer of the shares to the employees in this
behalf. Thus the authority and competence of the Board to issue a direction for
the transfer of the shares to the employees has the full backing of the
benevolent legislation' enacted especially in order to restructure or revive
the sick undertakings. In the course of the discussion in the earlier part of
this order we have referred to the abortive efforts made by the learned
Mediator and the members of the different family groups of Kamanis for selling
90% of the shares of KTL. It however appears that no purchaser was coming
forth. The aforesaid exercise however shows the willingness and preparedness of
the concerned members of the Kamani group to transfer their shares on their own
even without a directive. Their willingness is however irrelevant since the
BIFR is clothed with the authority and competence to reduce the value of the
shares from Rs.10 per share to Re.1 per share and direct the transfer of the
shares to the employees. A point was made before the BIFR for the transfer of
the shares as regards the order reducing the value of the share and the
direction to transfer the shares at the reduced value of Re.1 per share. BIFR
has closely, carefully and dispassionately considered this dimension of the
matter and has rightly reached the conclusion that the intrinsic value of the
share is zero. The liabilities far exceed the assets and even by applying the
break-up or back-up method suggested by the members of the Kamani family the
value of the shares could be determined only at the intrinsic value of the
shares and the Board reached the firm conclusion that each share had zero
value. And even so the Board directed that the value of the share be reduced to
Re. 1 per share and directed them to transfer the shares at Re. l per share.
Having given our anxious consideration to this factor even on our own, we are
fully convinced and fully satisfied that the Board was perfectly right in
directing the members of the Kamani family to transfer the shares at the rate
of Re. l per share in order to effectuate the Scheme for revival of KTL. We may
also mention that the BIFR was wholly right that the provisions of the Act were
immune from challenge by virtue of the declaration contained in Section 2 of
the Act attracting the application of Art. 31C of the Constitution.
to the merits of the Scheme sanctioned by
Section 18(2)(1): "transfer or issue of the shares in the sick industrial
company at the face value or at the intrinsic value which may be a discounted
value or such other value as may be specified to any industrial company or any
person including the executives and employees of the sick industrial
company;" PG NO 138 BIFR, it does not suffer from any infirmity. It has
been considered to A be feasible and economically viable by experts. It
envisages the management by a Board of Directors consisting of fully qualified
experts and representatives of Banks, Government and of the employees. The
Scheme has the full backing of the nationalized Banks and the encouragement
from the Central Government and the State Government which have made
commitments for granting tax concessions. The backing and the concessions are
forthcoming essentially because it is a Scheme framed by the employees who
themselves are making tremendous wage-sacrifice and are trying to stand erect
on their feet in order to salvage the ship which has been almost wrecked by
others. It is appropriate to refer to one more important aspect. The Scheme
envisages that the liability of the guarantors under the con tract of guarantee
executed in favour of the concerned Banks should remain unaffected by the
framing of the Scheme. BIFR has rightly made a provision in this behalf and
sanctioned the Scheme subject to the direction that the sanctioning of the
Scheme will not result in the detraction from the obligations incurred by the
guarantors towards the Banks. Since the Scheme is being framed under the
statutory authority and directive in order to revive the same in the larger
public interest and inasmuch as there is a necessary declaration contained in
Section 2 of the Act which attracts the applicability of Art. 31C of the
Constitution, the decision rendered by the BIFR is unassailable and
unimpeachable. Besides, the Scheme has been framed as per the direction and
mandate of this Court in exercise of its inherent jurisdiction and its
constitutional jurisdiction under Art. 142 of the Constitution and therefore
the framing of the Scheme and the enforcement of the sanctioned Scheme does not
detract from or have any impact on the obligation incurred by the guarantors in
regard to the debts incurred by KTL in the past.
concerned Banks were and are bound by the directives and mandates. Having given
our anxious consideration to the decision rendered by BIFR sanctioning the
Scheme taking into account all the factors we fully agree with the reasoning
and conclusion of BIFR and hereby stamp the Scheme with the imprimatur of this
apprehension has been expressed that same attempts might be made by those who
are not happy with the sanctioning of the Workers' Scheme to throw a spanner in
the wheel and to impede the implementation of the Scheme. We do not think any
such effort would be made having regard to the fact that the Scheme has been
devised as per the directions of this Court and that it has now been stamped
with the PG NO 139 imprimatur of this Court pursuant to this order. It is of
course true that if the legal forum is utilised with an eye on impeding the
implementation of the Scheme, it could throw everything out of gear. This
cannot be countenanced as implementation of the Scheme with expedition is of
the essence of the present exercise. The Act itself has been enacted in order
to evolve a speedy and efficient machinery so that a sick industry could be
revived with utmost expedition, production could be started, locked up funds
could be utilised for furthering socioeconomic development.
that the unemployment of starving workers could be ended before they are
starved to death and they are provided with employment to enable them to 'live'
with dignity instead of 'existing' in humiliating conditions. We, therefore,
make it clear that notwithstanding any order that may be secured by any party
from any other forum the Scheme shall be implemented in obeisance to the
judicial command embodied in this order and that in case there is any problem,
it may be brought to this Court for seeking appropriate directions instead of
resorting to other forums to impede the implementation of this socially and
economically wholesome Scheme.
of caution is required to be sounded before we conclude this order. While the Act
enacted in 1985 does envisage the revival of sick units by the workers who had
been rendered unemployed, it is (as far as is known) for the first time that
the legislative intent reflected in the relevant provisions of the Act to
encourage workers' schemes is being given a concrete shape in this manner. It
is perhaps for the first time that such a Scheme sponsored by the suffering
employees themselves has come to be sanctioned. Under the circumstances a very
heavy burden rests on the shoulders of KEU and the concerned employees.
of thousands of similarly situated workers would be watching with anxious eves
the outcome of this bold experiment undertaken by the workers of KTL. On their
success or failure will depend the future hope and destiny of tens of thousands
of similarly situated workers. Success of this venture will instil new
confidence and enable the workers to try to build their own future with their
own hands albeit at Some initial sacrifice. Failure will be visited with
disastrous consequences. We, therefore, not only hope and trust that KEU and
the concerned workers will make themselves fully aware of this crucial factor,
but also beseech them to rise to the occasion and individually and collectively
do their best to make it a success. They will have an opportunity to show to
the world that the workers in New lndia are capable of managing their own
affairs, shaping their own destiny, and building their own future. They will
also have an opportunity to establish that when the workers are inspired by an
ideal they can produce optimum quantity PG NO 140 as also the best quality.
Because, they would be working for a great cause, and working for themselves
instead of working for others who often deny to them their legitimate dues and
even deprive them of such legitimate dues by appropriating to themselves the
fruits of the worker's labour. Be it also realized that the Trade Union
Movement, in the event of the success of this exercise, will be stepping into a
new creative phase in the struggle of the working class to assert its identity.
One can almost hear the footsteps of the new era in the corridors of future.
The workers must therefore ensure the roaring success of this Scheme in this
noble cause at any cost.
also hope and trust that the concerned nationalized Banks, IDBI, and the
concerned Governments will continue to cooperate with the same enthusiasm and
zeal and with the same motivation in order to make the Scheme a success so as
to usher in a new era in the industrial history of New India. On this note of
cautious optimism we conclude.